Starting a Start-up is a Brutal Game

If you feel that you really have it in you to change the world by creating cutting-edge and highly-scalable production that will earn you millions of dollars, then you better not keep your hopes up yet.

Starting up a business is not easy matter. It is not a walk in the park. The media might have glamorously reported the beginnings of successful start-up companies too obsessively, but they left one thing out: some of those ventures fizzled after a few months.

From Silicon Valley, China and parts of Southeast Asia, many of the start-ups five or six years ago are not around anymore today. There may be a few who are still attracting investors, but a closer look at the financial details will show that the returns are slightly skewed towards a tiny, select group who would go on to become multi-millionaires or billionaires, while majority are left to fight for the crumbs. A consolation prize isn’t much consolation at all.

Suddenly, becoming a lifestyle entrepreneur or – gasp – an employee in a large corporation doesn’t sound like a cop-out. Even the smartest people can fail. These are sane routes for most of us, more so if you have mouths to feed and aging parents to care for.

Meanwhile, some Asian countries have done their homework and revived their Early Stage Venture Fund (ESVF) policies which co-funds growth stage start-ups alongside venture capital firms. That’s as good an endorsement as any.

For aspiring founders, here are the implications of that endorsement:

• Starting a high-growth internet company has become easier, but not by much. Some of the shady investors fleecing your predecessors have been rooted out, and if new ones come in, you can easily get feedback on who’s legit. The start-up talent pool has also grown. Yet you are still more likely to fail than succeed. More than half that will exit the US market – with mature start-up ecosystem –will more likely end up losing money for angel investors.
• Failure has become more palatable. Gone are the tales of entrepreneurs going into financial ruin after their start-up crumbles. If you raise seed money, you’ll still make sacrifices, but at least you’ll get a wage. And if it’s time to quit, your investors will work with you to sell your start-up to someone else for a soft landing, which means you might end up in a cushy job in a large corporation anyway.
• You can be part of the tech ecosystem without being a start-up founder. Why rush to play the fundraising game? You could work as an engineer, bizdev person, or marketer in a start-up and learn the ropes before doing your own thing. Heck, why be in a start-up at all? Join a law firm, software development agency, or become a venture capitalist, tech reporter, or a person with a faux-cool job title. If you crave independence but some semblance of stability, start a service company catering to the start-up ecosystem.

Just remember: if you want to make boatloads of money, trying to create a true game-changer won’t be the most likely way to succeed. While the scenery has become less gloomy, it’s still true that if you want to do a startup, your reason for doing it should be to create new value and navigate uncharted markets.